Funding Secure – An Introduction


Funding Secure started life in 2012 as a pawnbroking P2P platform. To date it has issued £175 million worth of loans and advertises an investor base 3,500. Although it started life as a pawnbroking platform, for the last 3 years it has taken on property backed loans also. Funding Secure loans are usually for 6 month terms and unlike some platforms who pay a monthly return, loans accrue interest daily but is not paid until the end of the term and only if the loan is settled.

Minimum deposit for Funding Secure is £100 made by bank transfer, with a £25 minimum loan part purchase. Rates of return on offer range from 12.00% to 16.00% per annum. There are no charges for lenders and Funding Secure offers a secondary market for early sell out dependant on a buyer being available.

The Secondary Market

Funding Secure’s secondary market place is a little more complicated than some of it’s competitors. When it comes to tax liabilities the individual left holding the investment at term is liable for the entire term. For example if you snap up a 3 month old loan hold it for the remaining 3 months you are liable for the tax on profit for the full 6 months. This is because the interest for the whole term is paid to whoever holding the loan part at maturity. To reflect this you can pick up secondary loans for as much as 1% discount (or a 1% premium if demand for a particular loan is high, or is closer to maturity) .

On the flip side of this if you are selling primary loans, and effectively passing on the tax liability, or selling for a premium (up to 1%) you can make a tidy profit (with a significant volume) when it comes to tax liabilities at the end of the financial year. I would seriously suggest holding off from getting involved in the secondary market if you are either new to P2P or the Funding Secure platform for at least the first year because if you are not too savvy you may end picking up problematic loans with tax liabilities you ratter wouldn’t have. Some loans get dumped for a reason.

The Funding Secure dash board

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The Funding Secure dashboard

Available funds – is the in-active balance on your account. This can either be invested (£25 minimum) or withdrawn.

My current investments – shows the total principle you currently have invested in loan parts. These funds can only be released on term and repayment of the loan, or a successful sale on the secondary market place.

Allocated funds – shows any funds you have put to a loan part that have not yet been accepted (interest will still accrue before the borrower accepts your offer of funds). It can take a little a while for offers to be accepted ( I’ve experienced as long as 4 weeks ).

Available investments – lists the investments currently available on the platform for investment. Information includes –

  • Reference – the loan ID.
  • Title – a brief description.
  • Amount – total size of the loan.
  • Rate – Anual ROI.
  • LTV – is the Loan to value of the security (capped at 70%).
  • Progress – shows how much of the loan has been funded so far.
  • Updated (scroll right) – shows any recent material changes to the loan.
  • Invest (scroll right) – shows the button to invest.

Is Brexit going to make us all homeless ?

If I could accurately predict the precise effects of the United Kingdom leaving the European Union (EU) I would not only be a very rich man but undoubtedly a man in great demand. Not even the most learned academics on the planet truly know what the UK’s Brexit negotiations will ultimately lead too, but that’s why it’s exciting, no ?

So in all seriousness the idea of this blog is bring together a collection of credible sources, information and data in an attempt to lay out some possible effects and changes Brexit may have on the UK property market. This endeavor is even more of challenge at this time as the UK prime minister Theresa May has just announced, in the last few days, a ‘snap’ general election to be held on the 8th of June. This means UK politicians are now in campaign mode, and not everything in an election campaign is necessarily rooted in the unbridled truth, but I shall try my best, nevertheless. This is also in light of several European elections including France and Germany to take place over the coming weeks and months.

One of the UK’s known strategies for the transferral of legislation from the EU to the UK is known as the ‘Great Repeal Bill’. This simply stipulates that all relevant EU legislation will be transferred at the stroke of a pen to be sifted through and reconstructed at the UK parliaments leisure. I’m not entirely convinced with the ‘simplicity’. This is an institution that the UK has been increasing intertwined with for over 40 years and even if the transferral of legislation is that easy, there are also physical disconnects and un-plugs that will need careful and considered management to avoid causing untold damage to either side of the negotiating table. Including areas that could affect the robustness of the UK property market.


Is the EU institution involved in the UK housing market ? If so how ?

The short answer to this question is no, at least not directly. However there could be an argument made that the EU do regulate, at least in part some peripheries of the UK property market. One example being, what are known as securitisations. Securitisations are banded together and repackaged mortgages which are then traded by 3rd parties as entirely new financial transactions. These securitisations can make up what is commonly referred to as a Government Bond which are then traded on the International Bond Market. This is basically one way a country raises money (in the form of debt exchange) when it needs to raise capital beyond its domestic income (taxes). Now, largely speaking the origin country is usually expected to regulated their own bond offerings to the bond market (poor regulation could lead to poor bonds and a country damaging its own credit score and ability to raise money in the future, so it’s in the countries own interest to make sure what they are offing is credible and well-regulated). The UK’s regulator is the Financial Conduct Authority (FCA). So where does the EU come into play ?

In 2010 at the Pittsburgh G20 the European Central Bank (ECB) along with its international partners agreed to accelerate the ECB’s regulatory program for international monetary markets in response to the 2008 financial crisis (ECB Source). While this program is significant with particular focus towards clamping down on fiscal misconduct and the lack of best practice policies, widely seen as a substantial contributor to the financial crisis, any EU centralised regulation or unintended negative consequences of specific regulation is, and can be, at least in the large part buffeted by the fact the UK is not part of Euro currency. For example the Bank Of England have fiscal tools at their disposal to migrate or reduce any potential damage to the UK economy. So to come back to the specifics of the UK housing market in respect to the trade of mortgage securitisations on the international market, yes EU regulation could potentially affect the UK’s effectiveness for such bond sales, which in turn could affect the wider UK housing market through the availability or cost of mortgages. However the UK’s bond market is largely the UK’s responsibility and given the interconnected nature of such international markets in 2017 it seems foolish to believe that EU would ever want pursue a punitive policy against the UK designed to cause damage to the UK economy or the property market as it would very likely damage the EU at the same time, and though contagion could well ignite another global financial crisis.

The second area that needs examination would be the specifics around property and land ownership. Having spent some time searching through the EU’s online archive of available literature I have been unable to find anything that specially relates to legislation around the ownership of property in either member states or soon to be former member states. There are plenty of 3rd party research papers and analysis for most of the countries of EU (including the UK) on this subject but they stop short of being a representative view of the EU institution, in fact most of them specifically state that they are independent and non representative. So I’m afraid on this one we are going to have to venture a little way down the long and winding road of hypotheticals. It has long been a stated ambition of the EU to desire ‘ever closer political union’. One of the most fundamental tenets of any political establishment is the ‘ownership of property/wealth’. There is a remarkable amount of research conducted on behalf of EU on this subject but yet there is no concrete legislation. One might well deduce that legislation could be in the pipeline (post Brexit), but it’s equally viable that the EU intend to keep property ownership and its accompanying legislation, devolved to its constituent states (countries). After all property ownership and rights often date back centuries and vary massively from country to country. So as it stands the EU has no legislation (as far as I can find) on this subject so I think the UK’s house’s and the rest of EU members house’s are not about to be repossessed, thank goodness.

What’s the current state of foreign investment in the UK property market ?

This is largely an unpredicted consequence of the June 23rd 2016 referendum result or at least an under reported consequence, it’s also a story of two halves. On the 18th of March this year The Telegraph published an article highlighting the recent flurry of foreign investment in to the UK. This includes a £563m purchase of an office park near Reading, a Liverpool shopping centre for £300m and a £400m redevelopment in Edinburgh. What do all these investments have in common ? They are all outside of London, in fact the investors in the Reading Office park also sold its stake in the ‘Cheese Grater’ building located in the heart of London. The lack of London-based property investments on crowdfunding platforms are also noticeable in their absence.

There are multiple factors at play currently creating this situation, the devaluation in stirling being a significant one. A foreign investor buying in either American dollars or a currency pegged to the dollar can enjoy an average of a 10% effective discount (based on pre referendum exchange rates) due to the drop in stirling, if that 10% recovers in due course an investor could make millions in profit on a large investment for nothing more than their patience, a very attractive opportunity indeed. There are also regional factors at play, such as the confirmed development of the HS2 rail line, The Midlands Engine growth fund and The Northern Powerhouse growth fund.

London’s problems have been a long time coming. Excessive, unchecked foreign investment in to the capital over 20 years has resulted in hyper-inflation of property prices, the large-scale gentrification of whole postcodes and a bubble that looks fit to burst. The smart money seems to leaving London at a pace and its difficult to see how London will get out this one without enduring significant pain. You know what they say ‘what goes up must come down’ and London has gone up very high.

Domestic consumer confidence.

When talking about economics it doesn’t take long for the term ‘consumer confidence’ to come up. Consumer confidence is more of a temperature gauge, a feeling or a prediction of the health or potential growth of an economy at large, rather than a cold hard fact or data. So it’s not an exact science but it’s still a useful indicator of what the future might hold in terms of growth and economic health. For the purposes of this blog I’m going to try to focus in on consumer confidence specifically related to the property market, but let’s start with overall picture of UK consumer confidence. The latest figures for consumer confidence (based on the Consumer Price Index (CPI)) show a figure of minus 6 points for the month of March 2017. This has been fairly stable since November 2016. The biggest movement in this measure in the last 12 months was July 2016 following the UK referendum result where it dropped to minus 12 but bounced back rapidly the following month to just minus 1. In the last 10 years only 2015 has shown positive measures with 2008 setting records for negative measures, bottoming out at huge, minus 39 points in July of 2008. So what does this figure actually mean ? In essence its rolling total for most (some minor specific transactions are excluded such as those bases around criminality) of all the transactions taking place within the UK economy. So the latest figures for March 2017 state that the sum of all the transactions taking place inside the UK were 6% lower in value based on the previous years comparable month, so show a retractation in economic activity as a whole. There needs to be caveat applied here in terms of current reduced rate of Stirling, meaning foreign investment is actually at a monetary lower value, which in turn is applying downward pressure on the overall consumer confidence figure, although even with this anomaly extrapolated economic activity is still down, slightly.

So let’s look at the picture in specific relation to the UK property market. One reputable index used by a large part of the industry is the Ipsos MORI Halifax Housing Market Confidence Tracker. This is a consumer survey given to Halifax customers when conducting property transactions. Its based on a number of questions around confidence and opinion of the consumer most of which are framed ‘in 12 month’s time’ predictions. One of questions asked in the survey is as follows –

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As you can see the overwhelming response to question of house price levels is a moderate increase over the next 12 months. This is in line with a general consensus of marginal increases in-house prices in 2017 leading to potential stability in late 2017 early 2018, reported by The Guardian, the BBC, This Is Money, and Barton Wyatt. Figures for London are bucking the trend with a slower than UK average increase in prices with some areas actually falling as the London market continues to overheat and burnout.

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The chart above (taken from the same Ipsos MORI survey) also shows the prediction for a moderate increase of house prices, but the blue line shows responses to future confidence in the state of the UK economy as a whole. As you can see a majority of participants are lacking confidence in the strength of the wider UK economy. Now this is interesting because logic might indicate a weakening economy would lead to a drop in house prices or demand for houses. So why does this not appear to be the case ? Well the UK housing market has always been particularly resilient even when the wider economy is cooling or retracting. Part of this discrepancy could also be down cynical media reporting, everybody is told the economy will suffer post Brexit but reality so far is not supporting that theory, although that could change once Brexit negotiations are completed. Along with this there are very limited investment and saving options for UK consumer right now with record low interest rates, making property still an attractive proposition.  So with the exception of the London area consumer confidence in the UK housing market still seems to be resistant.

The wider European landscape.

Its worth considering the wider European situation from an investors point of view as well. Europe, or more specifically Western Europe has been seen as an attractive place for Middle Eastern and Asian investors for some time. There is no denying the UK is in a state of political flux right now, but looking at the alternatives in Western Europe, both Italy and Spain have considerable unemployment problems at 11.5% and 18.6% respectively although they are slowly coming down. France currently has unemployment of 10% but that is gradually increasing. Germany has an impressive sustained unemployment rate at just 3.9% however economic growth is very sluggish at just 0.4%. That being the case for most of Central and Western Europe, Eastern Europe generally has strong growth but lacks the investment infrastructure and security seen in the West. As for the UK, it’s on course for 2% growth in GDP with an unemployment rate of just 4.7%.

The verdict ?

So to conclude my humble analysis of how safe the UK property market currently is. I would say right now it’s in pretty rude health. The UK is quite insulated from European market pressures because we have an alternative currency with full autonomy. There doesn’t appear to be any major regulatory obstacles to overcome in respect to the property market in the Brexit negotiations. Foreign investment and interest in investments across the country (excluding London) in both the public and private sector seems to be strong, with support from regional growth funds. Domestic consumer confidence has taken a hit but this is often short-term and driven by speculation not facts (people who need a house will still need to buy a house even if they put it off for 6 months). UK unemployment is at the lowest rate since 1977 and growth is moderate despite the prevailing political and economic headwinds. But of course it could all turn a 6 pence, so enjoy the ride.